Yield to Maturity (YTM)

Problems 11- 16: Calculate two ways: First, assuming annual interest payments and second, assuming semi-annual payments (worth two points each)

11. Darcie is looking at a bond that she can buy for $809.50. It matures in 15 years and has a coupon rate of 7.5%. If she were to purchase this bond what yield to maturity would she earn?

12. Eunice is looking at a bond that has a 6.5% coupon and will mature in 7 years. If her goal is to earn a YTM of 8% what would she be willing to pay today to purchase the bond?

13. Fred receives a call from his broker who has a bond that is selling for $646.50. It matures in 11 years and has a coupon of 5.5%. If Fred where to purchase this bond, what YTM would he earn?

14. Garth wants to invest only in Investment grade bonds or better. His strategy is to hold the bond until maturity and he wants to earn a YTM of 8% or better. He is offered a bond with a coupon of 6% and 8 years to maturity at a price of $890.00. If he buys it will it meet his investment goals?

15. Hallie is offered a bond with a face value of $5,000. It has a coupon of 6.75% and matures in 17 years. If Hallie requires a 5% return on her investment what would she be willing to pay for the bond?

16. Isabella has just $750.00 to buy a bond that she likes. The bond matures in 6 years and has a coupon rate of 7%. If Isabella is able to buy the bond what rate of return will she earn?